For Immediate Release
Chicago, IL – January 14, 2020 – Zacks Equity Research Shares of Meet Group MEET as the Bull of the Day, Bed Bath & Beyond BBBY asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Sanderson Farms, Inc. SAFM, Pilgrim’s Pride PPC and Lamb Weston LW.
Here is a synopsis of all five stocks:
Meet Group is lining up as a buy with momentum from its latest earning. Upwardly adjusted EPS estimates have propelled these shares into a Zacks Rank #1 (Buy). MEET lost almost all of its value when the dotcom bubble burst in 2000, but the company has since restructured. The firm has acquired various global dating and interactive apps that have thrown this company back into profitable growth.
In this technological age, people are interacting increasingly through a digital filter. Meet Group is improving the way people interact and meet through an online medium. The company operates platforms that are meant to connect people in this digitalizing age. The apps include MeetMe, LOVOO, Skout, Tagged, and GROWLr.
The online dating application space is quite saturated, but The Meet Group is still able to bring unique value to the table. This company has leveraged live video streaming on its platforms, which has brought in more revenue per user quarterly. Video revenue grew 156% year-over-year in the first 3 reported quarters of 2019.
The Meet Group has grown its MAU’s to 18.7 million (10% year-over-year growth). The company’s ability to appreciate its monetization of each user is its most significant driver. Its average revenue per daily user grew 20% year-over-year in Q3, and this metric for video users grew 93%.
These quickly saturating tech spaces need to consolidate as market share and economies of scale become essential to compete. Meet has made 4 critical acquisitions in the past 3 years, which have substantially grown the attractiveness of this investment.
Meet has had growing reliable free-cash-flows and a sizable cash pile of $27 million that gives this firm a fair amount of financial flexibility for continued investment in core competencies.
This stock is being valued at a forward P/E of 8.5x, which is less than half of what the broader market’s 18.9x and a fraction of its biggest competitor, Match Group, is being valued at. The appealing valuation makes MEET attractive to both retail investors as well as potential acquirers.
Meet has recently been approached by German investment group NuCom an arm of ProSibenSat.1 Media, Germany’s largest TV Network. Analysts are projecting that these shares would sell for at least $7 in an acquisition scenario, which would represent a >32% upside of the shares are trading at today. At MEETs current valuation, the firm looks ripe for a buyout, whether it’s NuCom or another acquirer.
MEET has seen a lot of volatility over the past 52-weeks, coming down over 40% then back up to flat.
Take Away
MEET is seemingly trading at a discount, and its small-cap characteristics combined with low coverage creates a savory mix for a value opportunity. This tech company is still expected to grow its topline by double-digit percentages for the next couple years and its EPS growth and margins look even better. 4 out of 5 sell-side analysts covering this stock are calling these shares a buy right now.
Bed Bath & Beyond has lost 80% of its value over the past 5 years, and I don’t see this toxic equity rallying back to highs anytime soon. BBBY began to bounce back from its $7.30 lows in August, but following a very disappointing earnings last week, these shares are again on a downward trajectory. Analysts have sizably dropped EPS expectations, and BBBY is now sitting at a Zacks Rank #5 (Strong Sell).
BBBY is another product of the retail apocalypse. Its inability to adapt to the changing commerce landscape has been its downfall. The company has been shaving down its profitability at an accelerating rate since 2014, and today Bed Bath & Beyond’s bottom line is just a fraction of what it was 6 or 7 years ago. It is expected to have declining revenues for the next 3 years.
The once strong free-cash-flows are turning negative, and the company has had to raise more debt to keep its liquid capital balanced. Gross margins are deteriorating quickly due to promotions, price matching, and other incentives to get people in the door, but unfortunately, it has not been enough.
Bed Bath & Beyond was forced to close 40 locations in 2019 and 20 more closures that were delayed until fiscal 2020. This is not the same massive scale of closures that other retailers had seen. Gymboree, which was recently purchased by Children’s Place, closed 800 locations in 2019, Chico’s is in the process of closing at least 250 stores, and GAP is beginning its closure of around 230 stores. I expect that Bed Bath & Beyond will continue to see an accelerating number of closure if significant systemic changes aren’t made.
Bed Bath & Beyond is trading at richer multiples than I think are warranted. Despite the company’s deteriorating financials, BBBY is still being valued on the high end of its 5-year trailing-twelve-month P/E valuation.
Take Away
This is one of those toxic retail assets that I would stay away from. There is definitely a further downside to this falling knife, and unless management can leverage a compelling omnichannel product offering that is consistent with the needs/wants of this new generation, I don’t see this firm staying afloat for much longer. Look for systemic changes in Bed Bath & Beyond’s strategy for clue into the company’s long-term trajectory.
Additional content:
Here’s Why Sanderson Farms Is Up More than 50% in a Year
Sanderson Farms, Inc.is on a firm footing, courtesy of its robust endeavors, which have helped this Zacks Rank #1 (Strong Buy) stock surge 54.1% in the past year, outpacing the industry’s growth of 35.1%. Let’s delve deeper into the aspects that make this poultry processing company a promising stock.
Factors Backing Sanderson Farms
Sanderson Farms is benefiting from strength in its poultry products, backed by improved average sales prices. Notably, the company’s top line advanced 13.6% year over year in the fourth quarter of fiscal 2019, courtesy of elevated average sales prices.
The company’s overall market prices for poultry products increased during fiscal 2019 from fiscal 2018. Additionally, market prices of jumbo wings increased 19% from the prior-year quarter’s figure, driven by robust seasonal demand. Also, prices for both leg quarter increased nearly 20.6% year over year. Tray pack sales prices saw a slight improvement in the last reported quarter compared with the year-ago quarter’s level.
Further, management highlighted that protein prices are expected to be higher going in 2020 on the back of worldwide protein deficit caused by African swine fever’s impact on Asian pork supplies. Additionally, increased promotions for chicken sandwiches at quick-serve restaurants as well as higher anticipated beef and pork prices are likely to drive growth in the poultry market in 2020.
Moreover, the company’s export demand has been impressive for a while. Markedly, export sales have been rising for quite some time now. Gross export sales increased 31.8%, 19.6% and 25.8% in fiscal 2019, 2018 and 2017, respectively. Encouragingly, management is optimistic about shipping products to China and expects to derive material benefits from it.
Apart from this, Sanderson Farms’ healthy cash flows have helped it return excess cash to its shareholders in the form of dividends and share buybacks. Notably, the company generated $206.8 million as net cash from operating activities in fiscal 2019, wherein it paid out dividends worth $28.3 million. The company also has a share buyback plan (approved in 2009) underway, extending till 2021.
Sanderson Farms has long been strengthening its product portfolio. The company is known for its processed and prepared chicken products available in varied sizes that are also sold in foreign markets like Mexico, the Middle East and Central Asia.
These factors position Sanderson Farms well to cash in on the prospects.
2 More Stocks Worth a Look
Pilgrim’s Pride has a long-term earnings growth rate of 22.5% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Lamb Weston has a long-term earnings growth rate of 8.8% and a Zacks Rank #2.
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Meet Group, Inc.(The) (MEET): Free Stock Analysis Report
Sanderson Farms, Inc. (SAFM): Free Stock Analysis Report
Pilgrim’s Pride Corporation (PPC): Free Stock Analysis Report
Lamb Weston Holdings Inc. (LW): Free Stock Analysis Report
Bed Bath & Beyond Inc. (BBBY): Free Stock Analysis Report
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